Texas and California: A Tale of Two Oil States

May 16, 2013

Texas and California offer competing visions for how an economy should be organized. Both states benefit from vast natural resources, including two of the largest oil reserves in the country. Despite this similarity, Texas and California have drastically different economies and economic outlooks, says the Wall Street Journal.

Because of California's environmental restrictions, the state is no longer among the top three oil-producing states in the country.

Texas has more than doubled its oil output since 2005 and now pumps more than 2 million barrels a day, which could double by 2016.

More than 400,000 Texans are employed by the oil and gas industry with an average salary of $100,000 a year.

The oil industry in Texas generates $80 billion a year in economic activity and generated more than $12 billion in taxes in 2012. The tax revenue from oil production helps the state avoid levying an income tax, which encourages business growth. In California, the picture is much different -- oil output is down 21 percent from 2001.

Despite the rising price of oil, which now trades around $95 a barrel, California has continually shunned exploitation of its vast offshore reservoirs.

According to the Department of Energy, the Monterey shale off California's coast could contain twice as much oil as the Bakken shale in North Dakota, which has brought significant wealth to the state in a short period of time.

Much of the difference between Texas' and California's extraction of oil and gas is due to political culture. Californians have elected politicians who believe that fossil fuels are dirty energy. They have also passed cap-and-trade legislation and wagered on many green companies that have gone bankrupt.

California's green energy agenda is in stark juxtaposition to Texas, which has removed barriers to oil production.

Since the recession, Texas has led the nation in job creation with a jobless rate of 6.4 percent while California has the nation's third highest at 9.4 percent.

California has the oil and gas reserves to attain the prosperity that Texas has enjoyed but must first ditch the ultra-green agenda.